The CrossCheck website receives a lot of queries: “Is this a good check?” … “I need to verify a check.” … “I received this check in the mail, is it real?” … and a dozen variations on a weekly basis.
The marketing team responds as follows (or something similar) if the message is from a consumer:
“CrossCheck provides check guarantee and other payments-processing services to merchants via monthly service agreements. We suggest you discuss the situation with the issuing bank. Thanks and good luck.”
Sometimes the messages are disheartening: “Just got burned by a bad check.” If it’s a merchant, we explain that we can’t do anything about that particular check, but we can guarantee future checks to mitigate their losses.
The marketing team connects them with a salesperson who can make recommendations about which CrossCheck service is best for their business type, check volume, customers, etc.
How Does CrossCheck Guarantee Checks for Merchants?
The answer is probably not what you think. First, there is no “secret sauce.”
CrossCheck can’t tell a good check from a bad one. Only an issuing or drawee bank can say whether or not sufficient funds exist in a check writer’s account. What happens next for CrossCheck, a merchant, or an individual is a function of time and distance.
If the party receiving the check is literally standing at a teller window and there are sufficient funds in the check writer’s account, then they can successfully cash the check. If they are on the phone or across the country, there is no way to determine if sufficient funds will exist when the check is processed by the drawee bank. This uncertainty is the reason check guarantee exists.
The Alternative to Secret Sauce
The longer answer is that CrossCheck takes calculated risks while guaranteeing checks and has the ability to collect on bad ones if things go wrong.
When a merchant signs an agreement with CrossCheck, they are effectively transferring the risk of accepting checks to CrossCheck.
If it’s not the secret sauce, then how does CrossCheck do it?
First, CrossCheck has access to an enormous amount of checking account data that is only available to financial institutions. The info exists in subscription-based and proprietary databases. CrossCheck's database, for example, contains details on millions of check writers, including information on closed accounts, check-writing histories, and individuals who have offered invalid checks in the past.
Next, CrossCheck uses algorithms to score check writers and make risk assessments.
CrossCheck also evaluates the authenticity of what is printed or not printed on the checks.
All of these parameters factor into whether a check is guaranteed or not, and it all happens in seconds. This is the essence of check guarantee services and explains how CrossCheck can stay in business and turn a fair profit. For the record, the privately held company has been around since 1983 and the founder is still the chairman of the board.
Why Are Checks Declined?
According to merchant feedback, CrossCheck declines fewer checks than the competition. Here are a few basic reasons for declining a check:
- Driver’s license concerns — Expired, invalid or stolen licenses.
- Too many checks — The check writer has written too many checks during the risk period of the particular merchant.
- MICR code — Issues with the magnetic ink character recognition line (unreadable digits, fake accounts, etc).
- Over the limit — The check amount is over the limit authorized in the merchant’s service agreement. (Limits can be increased on future checks per adjustments to service agreements, often in as little as 24 hours.)
Who Are CrossCheck’s Customers?
CrossCheck doesn’t guarantee checks for some high-risk business models such as check cashing outlets.
CrossCheck does, however, provide services to a wide variety of business types — new and used auto dealerships; home furnishing stores; building supply centers; auto aftermarket stores; heavy equipment dealers; medical, dental and veterinary offices; retailers such as music or convenience stores; some contractors (e.g. HVAC or remodeling); and more.
Regarding scale, CrossCheck merchants include single-location businesses as well as national accounts such as the largest auto dealership in the country, a well-known chain of veterinary hospitals, and a multi-state supplier of bottled commercial gases.
Merchant customers use a variety of CrossCheck services that can be mixed and matched according to specific business types. The one common denominator among all of them is that accepting checks continues to be a money-making solution over other forms of payment.
It’s Not Just a Bad Check Problem
CrossCheck’s Check Guarantee helps businesses complete transactions that would otherwise not happen. The result is greater profits. CrossCheck also helps them complete sales more efficiently using Electronic Check Processing.
“Each time a decision is made to not accept a check as a form of payment, a sale is potentially lost,” said Senior Vice President Charles Dortch III. “In addition, the check writer may choose to take his or her business elsewhere, maybe even to a direct competitor.”
CrossCheck even has a solution for merchants who say they don’t have a bad check problem.
“It’s important to understand that CrossCheck does more than solve a bad check problem,” said Dortch. “A large portion of merchants utilize our Multiple Check premium to increase sales. When a customer doesn’t have the funds necessary to satisfy a payment, we allow the merchant to accept 2 – 4 checks in order to capture the sale that day.”
Want to learn how CrossCheck services can help your business increase sales and mitigate risk while saving time and money?
Download our free Check Guarantee guide to find out.